The 7 Ts: Team, TAM, Traction, Tech, Transformation, Timing, 10x.
Our investment thesis is simple; keep a high bar and set demanding hurdles for any startup to be considered by our team.
Before you send your pitch deck, try to answer the following questions. How many T’s does your startup check off?
TEAM: At the core, we are looking for great teams. Preferably proven founders or founders that have profound knowledge and experience operating in the industry they are trying to disrupt. We know from first-hand experience that the road is long. We want to make sure that there is an excellent match between the team and us.
As Devdutt Yellurkar, CRV Managing Partner, said: “We want to be the VC that back the founders all the way,” which paid off in full when he traveled from Boston to Copenhagen in 2009 and decided to invest in Mikkel, Alexander, and Morten, the founders of Zendesk. Zendesk has since proven to be one of Denmark’s biggest success stories, going public in 2014 in the US.
TAM: So you show up with a great team, then what? We want to understand the problem you are solving. What is the scale of the problem? What is the Total Addressable Market (TAM)? Understanding the problem will help us understand the size of the opportunity. We are focused on ideas that target global billion $ markets.
TRACTION: If you can show some proof of traction, be it early adopter feedback, initial paying customers, or the $100K MRR Series A milestone, it will help us better see a path to the billion $ addressable market.
TECHNOLOGY: What makes you unique? Do you have a technology edge? Do you have something others might call ‘rocket science’? Do you have something that can scale and protect you from others trying to copy you, especially if the market is crowded?
TRANSFORMATIVE: We want to see how your idea will transform the industry you are going after. Not just incrementally, but fundamentally. Think of Skype, Zendesk, Spotify, Unity, each defining a brand new category that allows them to dominate for decades.
You win a market by being first or best.
TIMING: Everything in life comes down to timing. Why now? Too often, we see the vision of founders collide with the realities of the market, often because their timing is wrong. But take Skype as an example of the opposite. Skype wasn’t first with VOIP, but their timing was spot on.
Internet pricing changed to flat rate and processing power accelerated, enabling peer to peer vs. client/server architecture combined with a “virus-like” distribution model powered by a viral network effect. We have seen it up close and would love to find more startups that can do this.
10X: We just said the timing is everything, but we are also a VC, and we are focused on returns. Hence we need to believe we can make a 10X return on our investment in your company. This means that balanced valuations are key to us; however, often one of the most challenging aspects to assess.
To summarize, “We invest in smart-ass teams with a kick-ass product in a big ass market.”